Sub: Clarification with respect to amendments to Customs and Central Excise notifications for EOUs – reg.

EOU/EHTP/STP/BTP schemes are governed by Chapter 6 of Foreign Trade Policy (FTP), duly supported by the relevant Customs and Central Excise notifications. These notifications have now been amended in order to align them with the present Foreign Trade Policy (FTP), 2015-2020, as amended, as well as to remove redundancies that had crept in over the time on account of changes/supersession of certain other notifications mentioned therein and legal developments such as the introduction of GST and exempting the EOUs from the application of the Customs warehousing provisions. These amendments have been carried out by Notifications No. 79/2018–Customs and No. 23/2018-Central Excise, both dated 05.12.2018. Further, the B-17 Bond (General Surety/Security) being submitted by the EOUs has been similarly updated vide Notification No. 1/2018-Central Excise (N.T.), dated 05.12.2018.

2. The Notification No. 52/2003-Customs, dated 31.03.2003 provides for exemption from Basic Custom Duty, Additional Duties of Customs, IGST and Compensation Cess on various goods listed therein, when imported by the EOUs for specified purposes. This notification has been amended to provide that:-

(a) imported goods could be temporarily cleared without payment of all Customs duties, IGST and Compensation Cess not paid at the time of their import. However, the applicability of GST on supply of such goods shall be independently governed by GST laws.

(b) when duty has to be paid on the imported goods such as when these are cleared from the EOU, the same would be the duty/tax for which exemption was availed at the time of their import. However, in the case of capital goods, depreciation would be allowed as provided in para 4 of the Notification No. 52/2003-Customs, dated 31.03.2003. Further, for leftover textile fabric or textile material, such payment of duty would be based on the transaction value
as per existing provisions.

(c) removal/modification/updation of the redundant/old notifications/ provisions of the FTP etc., as follows:-

(i) providing that a job worker would need registration under GST Act/Rules to enable the EOUs to export of GST goods directly from its premises.

(ii) replacing the reference to Notification No. 62/2004-Customs, dated 12.05.2004 with presently valid Notification No. 50/2017-Customs, dated 30.06.2017 for payment of duty by Gem & Jewellery EOUs on the gold or silver content in the scrap, dust or sweeping cleared to DTA or for payment of duty by nominated agencies in case of failure of export in specified time frame.

(vii) removing the references to Commissioner of Central Excise/ Central Excise officer as the Customs work relating to the EOUs is now handled by the jurisdictional Customs officers.

(d) For promoting indigenization and export of electronics, Ministry of Electronics & Information Technology (MeitY) had recommended that the period of three years allowed for re-import of goods manufactured and exported by EOUs for the purposes of repair and reconditioning may be extended to seven years for specified goods. This was justified on the ground that overseas customers were otherwise constrained to prematurely scrap the repairable goods which are more than three years old. Accordingly, Sr.No. 14 of the Annexure-I of the notification has been amended to list specific goods manufactured and exported by EOUs that can be re-imported within seven years. These goods are required to be re-exported within one year of the date of re-importation.

3. The Notification No. 22/2003-Central Excise dated 31.03.2003 provides for exemption from various duties of Excise on the goods listed therein when procured indigenously by the EOUs for specified purposes. This notification has been amended to provide for:-

(a) deletion of reference to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978) these Acts are not in existence post-GST.

(b) modification of clauses (a) to (e) of the opening para of the said notification to allow procurement of excisable goods falling under the Fourth Schedule to the Central Excise Act, 1944 (1 of 1944). Also, Annexures I, II, IV and V of the said notification which listed various excisable goods that were allowed to be procured indigenously without payment of Excise duties have been removed as post GST, most of the goods now fall under GST.

(c) continuation of the facility extended to the EOUs engaged in processing or manufacture of articles of granite, processing of agricultural products and production or manufacture or packaging of goods in horticulture, agriculture
and animal husbandry sector to temporarily remove specified goods procured prior to 30.06.2017 without payment of Excise duty to granite quarries and to the fields and farms.

(d) clearance of capital goods and goods other than packaging material unsuitable for repeated use which were procured without payment of Excise duty prior to 30.06.2017, on payment of Excise duty availed as exemption.

Further, allowing the depreciation on capital goods, as provided, and charging duty on leftover textile fabric or textile material on the transaction value as at present.

(e) changes on account of redundant references to old/superseded notifications/FTP etc., as follows:-

(i) replacement of the reference to old Rule 20 of the Central Excise Rules, 2002 with the present Rule 16 of the Central Excise Rules, 2017.

5. The Notification No. 24/2003-Central Excise dated 31.03.2003 provides for exemption from duties of Excise on the goods manufactured by a EOU provided these are not brought to any place in India. Post GST, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978) are no more in existence. Therefore, suitable amendment has been made to remove reference to these Acts.

6. The EOUs have been furnishing a “Mother Bond” in form B-17 (General Surety/Security) for Customs duty free import, Excise duty free domestic procurement, provisional assessment, export without payment of duty, movement of goods for job work and return, temporary clearances, proper accountal of goods, etc. This bond was notified vide Notification No. 6/98–Central Excise (N.T.), dated 02.03.1998 under the erstwhile Central Excise Rules, 1944. A revised B-17 (General Surety/Security) bond updated with references to GSTIN, present FTP provisions and Notification No. 52/2003-Customs dated 31.03.2003 etc., has been notified under the present Rules 7, 9, 21 and 22 of the Central Excise Rules, 2017. This new bond will be applicable to the new EOUs. The existing EOUs shall continue with the earlier B-17 bond already executed by them so that there is no disruption in their working. Also, all relevant instructions applicable for the old B-17 bond will be mutatis mutandis applicable to the new B-17 bond.

7. While the above paras briefly explain the changes varied out in the aforementioned notifications, all officers concerned are requested to carefully peruse the amending notifications to better understand the new legal stipulations that apply to the EOUs.

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